NEW YORK ( TheStreet) -- Folio Investing, an online broker, has been crowing about its target-date retirement portfolios. Folio says that most of its portfolios have outperformed competitors by wide margins. According to Morningstar, the average 2020 target-date mutual fund returned 1.3% annually during the past three years. In comparison, Folio says that its conservative 2020 portfolio returned 3.4%. Folio attributes the success to a bold strategy that ignores traditional rules for diversification and asset allocation.The Folio investments are not mutual funds. Instead, they are baskets of ETFs. To invest in one of the Folio target-date portfolios, you must open a brokerage account at the company. Retail investors can maintain an account for a flat annual fee of $290. Can Folio continue delivering competitive returns in the future? That is difficult to know because the track record is still short. For the time being, most investors may feel more comfortable with one of the conventional target-date mutual funds. But the Folio offerings are worth watching to see if they can demonstrate a new way to manage retirement savings. Target-date funds are designed to serve people who plan to retire around specific dates, such as 2020 or 2040. The funds are broadly diversified, including mixes of stocks and bonds. As the retirement date approaches, the portfolios become more conservative, aiming to avoid losses. The target-date category is dominated by large fund companies, including Fidelity Investments, Vanguard Group, and T. Rowe Price ( TROW). Though each company has a slightly different strategy, all the major competitors agree on basic approaches. The funds emphasize core holdings that include large-cap stocks and investment-grade bonds. As the retirement date approaches, the bond allocation increases and equity holdings are reduced. While the major companies provide broad market coverage, Folio's target-date portfolios invest in niche ETFs. To appreciate how the major companies differ from Folio, compare Vanguard Target Retirement 2040 ( VFORX), which returned 1.3% annually during the past three years, and Folio's moderate 2040 portfolio, which returned 1.5%. The Vanguard fund has about 62% of assets in Vanguard Total Stock Market Index ( VTSMX), a broad index that fits in the large blend box, 26% in Vanguard Total International Stock Index ( VGTSX) and 10% in Vanguard Total Bond Market II Index ( VTBIX).